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exactEarth Reports Q1 Fiscal 2017 Financial Results

Press Release From: exactEarth Ltd
Posted: Wednesday, March 8, 2017

exactEarth Ltd. ("the Company"), a leading provider of Satellite AIS ("S-AIS") data services, announces its financial results for the three-month period ended January 31, 2017. All financial figures are in Canadian dollars unless otherwise stated.

Q1 2017 Financial Highlights

  • Revenue was $3.3 million
  • Subscription-based revenue was 89% of total revenue
  • Subscription-based revenue in the Commercial market increased 11% from Q1 2016
  • Order Bookings were $8.9 million compared to $4.2 million in Q1 2016
  • Adjusted EBITDA* was $(0.64) million
  • Cash balance was $11.2 million at January 31, 2017

Q1 2017 Operational Highlights

  • Announced the successful launch of four hosted payloads for the next generation constellation, exactView™ RT, powered by Harris Corporation
  • Signed a four-year CDN $2.7 million contract with MacDonald, Dettwiler and Associates Ltd. ("MDA") to provide AIS data processing services for the Canadian Department of National Defense's Polar Epsilon 2 project
  • Entered into a five-year USD $2.0 million partnership agreement to provide S-AIS services to another large country in Asia
  • Signed a three-year USD $1.75 million contract with the Indian Navy for S-AIS services
  • Awarded a £1.1 million grant from the UK Space Agency to provide small-vessel tracking services for South Africa's small boat owners and operators

"Q1 saw significant new additions to our order book and the successful launch of the first four payloads of our next generation constellation, exactView RT," said Peter Mabson, CEO of exactEarth. "Subsequent launches for exactView RT are set for 2017 and will be major events for us. These satellites will enhance our service level and create the potential for new revenue streams from a host of new products. As the various satellites become operational in 2017, it will mark the beginning of our move towards a continuous real-time global vessel tracking service capability in 2018."

Financial Review

Total revenue for the three months ended January 31, 2017 ("Q1 2017") was $3.3 million compared to $6.4 million in Q1 2016.  The year-over-year change in revenue was primarily due to lower revenue generated by the Government of Canada ("GoC") contract, which accounted for $3.2 million of the difference. Sales for Q1 2017 were strong with Order Bookings of $8.9 million compared to $4.2 million in Q1 2016.

Subscription Services revenue (as defined below) for Q1 2017 was $3.0 million compared to $5.4 million in Q1 2016. Excluding the impact of the GoC contract, Subscription Services revenue would have increased by $0.8 million in Q1 2017.

Subscription Services revenue in Q1 2017 represented 89% of total revenue compared to 84% in Q1 2016. Subscription Services revenue from commercial customers in Q1 2017 rose 11% compared to Q1 2016.

For Q1 2017, exactEarth generated $0.62 million in non-cash Subscription Services revenue, from an Asset Transfer Agreement with Communitech related to the EV9 satellite. Under the agreement, the Company will provide in kind datasets at a value of $3.7 million, not licensed for commercial use, in exchange for title to the EV9 satellite, subject to certain restrictions. As of January 31, 2017, the Company has recognized, in full, all of the non-cash revenue from the in-kind sale of these datasets. The complete datasets have been delivered to Communitech and title to the EV9 satellite has transferred to exactEarth. 

Data Products revenue for Q1 2017 was $0.28 million compared to $0.3 million in Q1 2016. Other Products & Services revenue for Q1 2017 was $0.1 million compared to $0.69 million in Q1 2016.  This revenue tends to fluctuate from quarter to quarter as it is generated from on-demand customer requests and long-term percentage-of-completion contracts.

Gross margin for Q1 2017 was 45% compared to 59% in Q1 2016. Gross margin decreased year-over-year due primarily to lower revenue, and was offset, in part, by a decrease in operational costs for the Company's satellite constellation and the reimbursement of costs related to the Company's Technology Demonstration Program Collaboration Agreement ("TDP Agreement") with MDA. TDP Agreement funding recognized as an offset to cost of revenue for Q1 2017 was $0.1 million.

Prior to the end of fiscal 2016, the Company took steps to streamline and re-organize its business, which is expected to reduce ongoing expenses in future periods. The re-organization resulted in the termination of 14 employees effective October 13, 2016, and was a necessary step in the Company's efforts to reduce its satellite infrastructure costs and transition the business to that of an information and intelligence data services company.

Selling, general and administrative expenses for Q1 2017 were $1.9 million compared to $1.9 million in Q1 2016. Unlike in Q1 2016, SG&A for Q1 2017 includes public company-related costs as well as costs related to the move of the Company's headquarters. SG&A for Q1 2017 also reflects expenses related to order bookings, which were up more than 100% from Q1 2016.

Product development expense for Q1 2017 was $0.41 million compared to $0.45 million in Q1 2016. The decrease primarily reflects the cost-savings initiatives described above.

Adjusted EBITDA for Q1 2017 was $(0.64) million compared to $1.5 million in Q1 2016. The year-over-year decrease in Adjusted EBITDA was primarily due to lower revenue from the GoC, offset in part by lower cost of revenue and lower operating expenses. (Adjusted EBITDA is a non-IFRS measure and is defined below.)

Net loss for Q1 2017 was $(2.0) million, or $(0.09) per share, compared to net loss of $(1.0) million, or $(0.09) per share, in Q1 2016. Net loss was greater in Q1 2017 primarily due to lower revenue from the GoC, offset in part by lower cost of revenue and lower operating expenses.

exactEarth used $2.1 million of cash from operating activities in Q1 2017 compared with cash used in operations of $0.38 million in Q1 2016. The Company's cash balance at January 31, 2017 was $11.2 million.

As at January 31, 2017, the Company had 21,605,506 shares outstanding.

- Read the full financial report here

Conference Call

The management of exactEarth will host an investor conference call to discuss these results in greater detail.  All interested investors and analysts are invited to participate.

Date: Wednesday, March 8, 2017 at 8:30 a.m. E.S.T.

Dial-in:647-427-7450 or 1-888-231-8191

Webcast:To access the live webcast, please go to http://bit.ly/2mbzuXS or visit the exactEarth website for more details. The webcast will be archived for 30 days.

Replay:Encore Toll Free Dial-In Number: (855) 859-2056 

Encore Password: 68477710

Dial-In Replay Availability: 08/03/2017 11:30 ET - 22/03/2017 23:59 ET

About exactEarth Ltd.

exactEarth is a leading provider of global maritime vessel data for ship tracking and maritime situational awareness solutions. Since its establishment in 2009, exactEarth has pioneered a powerful new method of maritime surveillance called Satellite AIS ("S-AIS") and has delivered to its clients a view of maritime behaviours across all regions of the world's oceans unrestricted by terrestrial limitations. exactEarth has deployed an operational data processing supply chain involving a constellation of satellites, receiving ground stations, patented decoding algorithms and advanced "big data" processing and distribution facilities. This ground-breaking system provides a comprehensive picture of the location of AIS equipped maritime vessels throughout the world and allows exactEarth to deliver data and information services characterized by high performance, reliability, security and simplicity to large international markets.  For more information, visit exactearth.com.

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